Posted on 02/02/2019 8:16:04 PM PST by entropy12
The U.S. housing market is crumbling--a worrying indication that an economic catastrophe could be brewing. Yet, nobody seems sure why this is happening in an economy that remains hale and hearty by most measures.
Existing home sales cratered a massive 10.3 percent year-over-year and 6.4 percent month-over-month in December to just 4.99 million units. That was several multiples worse than the 1 percent month-on-month decline that a Reuters survey of economists had projected. It also marked the lowest level of sales in three years and the steepest decline in seven years. Home sales declined on a year-over-year basis in every month apart from February, a trend that grew more aggressive towards the tail-end of the year given the 5.1 percent and 7.8 percent declines in October and November, respectively.
(Excerpt) Read more at safehaven.com ...
Easy loans caused inflation in the price of new houses and people are tired of it.
Young people have college loans they can’t pay, and the Chinese are skittish. So that’s two big buyer groups that aren’t doing what they could be doing.
“prices have outpaced incomes”
Totally agree. Salaries have not increased in 20 years. Inflation has, but I know no one that makes more than they did. I mean that from a professional level. We have flooded America with cheap foreigners; H1Bs and the like, not to mention millions of illegal aliens.
And on top of that, property taxes go up faster than wages.
We’ve added 10 million new renter houeholds over the past decade and high cost states like California have become renter majority, i.e. , more renters than homeowners.
Prices are completely out of control for what you’re getting. It’s $300k for a starter hole in my area (unless I want to move another 20 minutes out of town) the average home is 450k and my local burn just bought up and trashed a neighborhood of $100k homes to put down twice as many new hikes starting at $650k!!
With the average salary still around $45k in my city who in the world is affording these, let alone buying them?!
(And don’t get me started on how the cheaper housing has all gone to refugee immigrants who get government subsidies!)
“several multiples worse”
What the heck does that mean? Good grief, despite the slowdown in home sales, what’s even worse is the decline in the English language.
I can tell you why in our area (Central Illinois).
It’s because the taxes have been on a ~10% yearly rise for two decades.
Even the M.D.s are getting into modest $350k homes. There are no upper-end middle class (e.g., software entrepreneurs) that risk getting anything over $595k.
I’ve seen several well-to-do families have to take a $400k bath on their million-dollar home investment.
Trump has made noises about equallizing trade between the countries America, and China.
In my opinion that may involve seriously adjusting the exchange rate between the two countries.
However I would expect that to be preceded by a rise in precious metals. They are up near-term, but still lower than they had been.
So I am not sure.
“And on top of that, property taxes go up faster than wages.”
Totally true. Add to that, insurance premiums are also rising faster than salaries and faster than taxes. We paid $900/year in 2011. It’s $2750/year today.
“I’ve seen several well-to-do families have to take a $400k bath on their million-dollar home investment.”
My neighborhood was $950k in 2009. Average is $700k today.
What is the inventory?
Sometimes it is better to stay where you are.
It is sales that are down. I did not see any indication of inventory. Could it be that that is down as well?
Geez! All these breathless headlines and panic.
IDGAF.
Only a economic dullard would fail to see the Trump tax cuts as the likely cause.
When you can’t deduct local and property tax from your Federal income tax it’s going to cause pain in high tax states real estate markets.
You make a very good point. Prop taxes was the main reason we sold house in Chicago burbs and moved out of state.
Based on the traditional rules of thumb, such as you can afford a house costing 2 1/2 times your income, housing affordability has gone for beyond what people can afford.
Parents giving loans or gifts to adult children to make the down payment are very common nowadays.
I couldn’t afford to get a traditional mortgage for my own house at today’s prices, even though my family income has increased substantially over the years. I’m sure I’m not the only one in such a situation.
On the other hand, eventually, people may well move out of high cost northeastern and west coast cities, and seek cheaper parts of the country.
The taxes are coming. You get 10,000 tax free. But many of us pay far more in property taxes. Especially when you ad mortgages and other local or state taxes. Now people realize that their local or state taxes are huge. So they want to sell their house. Wait a year for housing to get back to normal.
One thing I’ve thought about over the past 5 or 6 years was what the impact on the Stock market was going to be when the baby boomers start dipping into their retirement accounts (IRAs/401ks).
Assuming they are likely the largest group of stock owners I have thought that it is likely that the stock market would face serious head winds as demand was reduced and sales were increased. I think the most pressure will be seen starting in about 8 years when the midpoint of the generation reaches 67 and they start taking out capital to spend on retirement.
Now I’m wondering if perhaps the same effect could be seen in the real estate market as the baby boomers are retiring and either 1) don’t want to move and uproot and/or 2) decide to downsize, move into condos, and/or nursing homes.
Just ramblings on my part.
The China card! Why didn’t I think of that! Yes indeed because Chinese economy is nervous with Trump putting pressure on their trade surplus every year.
My house in Wash state was bought by a Chinese family who paid cash back in 2011.
And yet, a large chunk of those huge January employment numbers were added jobs in the construction industry.
Are all those jobs going for commercial construction?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.